The Trade Desk 101

X-post at the NPI board:

Denny Schlesinger



TTD is one of my favorite positions right now. I’ve added to it twice this week, as I think it is a good value at these prices for its growth and prospects.

What I like-

Huge TAM when you consider all digital advertising worldwide.

In a growing trend, advertising spending is shifting more to digital.

Growing revenue at 40-50% with a PE of 34, P/S of just over 6, Earnings growing faster.

Fast growing newer company with positive growing earnings, tells me they have pricing power and a good business model. Most companies in their position are in land and expand mode losing money.

Optionality- they are moving into many countries, not just tied to the U.S., and into different forms of digital advertising.

Lead dog in this space.

Impressed by the CEO and founder, Jeff Green.

As they get more data they should only get better, companies want to see the return on their advertising dollars, no more “spray and pray” with ad budgets.



thanks for posting this, Denny

I spent some time reading up on TTD on a couple boards of the MF services that have recommended them and decided to take the plunge and bought my first (1.5%) position in TTD today.

The past couple of months I hadn’t been buying into too many new companies, mostly concentrating more and more of my portfolio around the companies where I have the highest conviction, and paring down some of the ones where the story hasn’t played out the way I expected. Just bought into ANET recently and now TTD.

Looking forward to following this story for years to come


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If you had to put on a bear hat regarding TTD, what would the case be?

long TTD

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Advertising is a very interesting multifaceted business. I would place a major division between the creative side and the execution side. The creative side is the realm of artists, writers, and psychologists who understand how to manipulate human desires. There have been some incredible advertising stories or campaigns like AVIS we try harder, and WV live below your means. When the three big American car makers created their muscle cars, one of them took apart a competing model to show how theirs was better. At first they were going to be sued for it. It turned out that the advertising campaign promoted the sales of both models so the third competitor wanted their cars taken apart on TV as well (I don’t know of this was literally true but it was the story going around).

The other side of the business is creating the ads and placing them in the media. Ideally, IMO, these two sides should be kept well separated. For reasons I don’t know the creative side got to be so competitive that price wars ensued and the ad agencies had to find new sources of revenue. One seemingly easy answer was charging clients for buying ad space but this creates a conflict of interest much the same way as banks and brokers who invest for their own account have a conflict of interest with their brokerage clients. They are supposed to have Chinese walls separating the two sides of the business but these walls are pretty porous.

What I see programatic advertising as doing is creating a functional marketplace for the selling of ad space. In no way does it replace or compete with the creative side of the business. It makes the execution side a lot more efficient. One thing that Jeff Green realizes is that there should be no conflict of interest between his business and his clients hence The Trade Desk is solely a buy side business.

Ogilvy & Mather used to be one of the top international ad agencies while I worked at Colgate-Palmolive (1966?). I don’t know if they still are as a long time has passed. Here is their history:

Of the links I provided in the NPI post the most interesting one is

My Advertising Is so Efficient It No Longer Works


It’s an hour long but well worth the time if you plan to invest in The Trade Desk. Rory Sutherland does not speak kindly of algorithms and business practices in his highly entertaining talk and he certainly has his well illustrated motives. While seemingly in conflict with The Trade Desk I believe that Jeff Green is cognizant of these issues, one reason for making sure there are no conflicts of interest with his clients. I believe that creative and programatic can and should live side by side in a symbiotic relationship. A well tuned marketplace is the most efficient way to buy and sell ads but the “tuning” should heed Sutherland’s worries to make sure that poor algorithms and business practices don’t destroy the creative artistry of the advertising campaigns.

Denny Schlesinger



If you had to put on a bear hat regarding TTD, what would the case be?

Good question but hard to answer! I don’t see how an auction marketplace for programatic advertising is going to disappear. Any danger that might exist for The Trade Desk is either shooting themselves in the foot or a competitor taking their thunder. In my previous post I provided a link to Rory Sutherland’s talk which covers some of the risks. Short term thinking is a risk because it could lead to conflicts of interest. One Fool has said a couple of times he prefers monopolies. This is an example of short term thinking. Clients don’t like and are not well served by monopolies! One objection to ARM Holdings (ARMH) was that it was a “gentler kinder gorilla” but they certainly held their own against the big nasty Intel gorilla. I think Jeff Green has been in the business long enough to heed these warnings.

That leaves the competition and I have no idea how that will work out but The Trade Desk has the first mover or path dependent advantage. I would say it’s a market for them to lose if they foul up.

Denny Schlesinger


Back in the day, think 1970s and before, advertising agencies received a commission for ads that were placed. If an agency placed an ad with a newspaper it contained a 17.65% mark-up so agency could net a 15% profit.

This was could become very expensive for the advertiser. They might spend $2,000 on creative $50,000 on media, but that would include 4X of the cost of creative just for “commission”. So of course the advertisers pushed back. They would say “I’m just buying the creative and I’ll place the ads myself.” Some newspapers tried to hold out and say the lower rates were only for agencies, so advertisers would set up their own agency. The upshot was there was a flattening of prices paid like there have been for everything from stock brokers to car dealers.

Over time this is a natural progression…to have greater transparency and to remove the good-ole-boy fat from the costs. If TTD can aid in this process as they say they can, they will be successful.

If they can’t, they won’t.

Long TTD
Explorer Supernaut